my wife and i both have a traditional IRA account worth about 5600$ each , if we cash them in what kind of penelty should we expect

Answer: Parish - Without some additional information, I can't get very specific, but I can give you some general information that you may find helpful.

When you take a distribution from a Traditional IRA there are several reporting and tax consequences that may occur.

If you were able to deduct all the contributions on your tax return for the year they were made, then the entire distribution will be taxable to you in the year of the distribution.

If some of the contributions were non deductable, then only the portion of the distribution that had not been previously taxed would be taxable to you in the year of the distribution. You would use Form 8606 to show this calculation.

In the situation you describe, you could have up to $11,200 of addtional income subject to tax.

Usually when an IRA distribution takes place prior to age 59 and 1/2, a penalty or additional tax is due. The additional tax is equal to 10% of amount of the distribution that you included in income on the return.

There are several exceptions to the age 59½ rule. Even if you receive a distribution before you are age 59½, you may not have to pay the 10% additional tax if you are in one of the following situations.

You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.

The distributions are not more than the cost of your medical insurance.

You are disabled.

You are the beneficiary of a deceased IRA owner.

You are receiving distributions in the form of an annuity.

The distributions are not more than your qualified higher education expenses.

You use the distributions to buy, build, or rebuild a first home.

The distribution is due to an IRS levy of the qualified plan.

The distribution is a qualified reservist distribution.

If you do not meet any of the exceptions and are under age 59 and 1/2, the additional tax would be $11,200 X 10% or $1,120. Form 5329 is used to report this on the return.

IRS Publication 590, Individual Retirement Accounts, is an excellent source for information on both Traditional IRA's and Roth IRA's. The publication is available at the IRS web site, www.irs.gov, to read, download, print or order.